HOUSING UN-AFFORDABILITY - YOU AIN'T SEEN NOTHING YET

You may have heard recently that the OMB (Ontario Municipal Board) will be “overhauled”. In case you’re not familiar, the OMB is a provincial body which has power over municipalities for land-use planning, and has been around since 1906.

There’s not much doubt that the unprecedented growth in the GTA is attributed largely to the powers of the OMB. It’s a big reason you’ve seen the massive development in this region (especially in the past 20 years). This includes everything – low rise, medium density, and high-rise condo development.

That’s all about to change. Before we get into it, let’s discuss how it works in a nutshell.

How Does The OMB Work?

Whenever a developer attempts to make land-use changes (outside of the as-of-right zoning policies) on a piece of vacant land or property, they are often met with opposition from resident groups. If city council does not approve their plans because of resident pressure, they can appeal through the OMB who will look at the project “de novo”, meaning from scratch.

In general, this process has been favorable to developers.

The intention is to essentially dissolve the OMB powers, and let cities take back full control of land use and development. In the past, developers have been able to somewhat circumvent the cities’ decisions by appealing through the OMB.

Now, there are certain flaws with the OMB that need to be corrected, as with any old institution (especially when they push projects in already extremely high density areas where transportation, schools and other services cannot meet the demands of all the new residents). But by axing the entire thing, it’s seems like a case of throwing the baby out with the bathwater.

A real life case of the Disney movie, UP - minus the balloons. This is a Pemberton group project that the OMB passed even though it clearly did not conform to city plans and policies in the already extremely dense Yonge-Eglinton corridor. This may be a case of the OMB going too far - but it's not a good reason to get rid of it entirely. Whether it's humor or irony, the owner of this home told the developer, "build with my blessing".

A real life case of the Disney movie, UP - minus the balloons. This is a Pemberton group project that the OMB passed even though it clearly did not conform to city plans and policies in the already extremely dense Yonge-Eglinton corridor. This may be a case of the OMB going too far - but it's not a good reason to get rid of it entirely. Whether it's humor or irony, the owner of this home told the developer, "build with my blessing".

Getting rid of the OMB ultimately will boil down to more power to resident groups and NIMBYism, and less power for developers.

There will be a replacement….

The New Kids On The Block

The OMB will get replaced with what they’re calling the Local Planning Appeals Tribunal. The narrative around this new body is that they will be a “true” appeals process that is more focused on the city’s interests as opposed to the province’s interests.

The focus is whether the requests from developers is consistent with the cities mandates and policies.

This tribunal will be able to make a final decision, but only on a second appeal and if they can show that the city failed to meet provincial policies or municipal plans.

So what does this all mean?

How Does This Affect You?

If you’re a homeowner, and you don’t want to see any development in your area, you’ll now have more power to voice your concern. With less oversight, cities who get pressured by residents groups will often cave in (remember these are council members who are interested in votes).

There’s also a free public support centre that will be set up to help citizens with legal advice, planning assistance, and even representation (Remember though, nothing is free – it will be subsidized).

If you’re a homeowner, investor or developer who wants to increase the size, scope or scale of a project beyond what is allowed in accordance to a city’s official plan or zoning by-law, you will have a tougher time.

This can range anything from not complying to a parking regulation by a small margin, all the way up to large-scale multi-unit apartment construction.

How Does This Affect Everyone?

I’ve talked in the past about the various reasons why housing is so un-affordable (see article Strategies To Invest In A Bubbly Market) There are many of them, but the one that sticks out to me is simply lack of supply. Construction at the moment is already very difficult and time consuming as it is.

By getting rid of the tribunal who can overturn a decision, it will likely lead to even less construction. This is certain to exacerbate the already un-affordable prices for Ontarians.

One of the reasons why we’re even able to do second suites in most cities now, is because of a mandate from the Ministry of Municipal Affairs and Housing.

This is a different department, but it’s still a provincial body that enforced a certain level of development in the city. Otherwise, we would never get an agreement between cities and resident groups - case in point - Calgary.

The media is sort of spinning this as a win for “local democracy”, but in my experience it’s just going to create more bottlenecks for the much needed development in the Greater Toronto Region.

Here’s a simple formula for you:

Green belt restrictions + not enough housing + no OMB oversight = even less housing available and continued extreme levels of un-affordability.

It’s really that simple.

The Strategy Doesn't Change

This might appear to be unfavorable news, but there's always opportunities. Focus on what you know, and what you can still do. 

1.       Improving property – still look to invest in properties that have potential for improvement (e.g., second suites, new additions, better functioning spaces)

2.       Focus on "as-of-right" – invest in properties where even if you can't do what is proposed outside of by-laws, it still makes financial sense. In other words, can you fall back on the rules at hand?

3.       Still push boldly outside of zoning, but always have plan B – You can certainly still push for a variance if you feel it’s worth it. The worse thing that can happen is they say no. But always ensure that your investment still works if you cannot do that, and you have to have a plan B and C in place.

I'll keep you posted on any new developments. Thanks again for reading.

NOTES:

1. Ontario's Proposed Changes to the Land Use Planning Appeal System

2. Toronto Star - Province plans to overhaul OMB and give more power to cities and citizens